Your loan origination system should drastically improve the experience of your customers; therefore, it’s important to be aware of the pain points your customers feel during the lending process.
For instance, the Federal Reserve revealed in a recent survey that nearly half of applicants that applied for loans at small and large banks were dissatisfied with the long wait for a credit decision. Similarly, 44 percent of applicants at large banks and 42 percent at small banks were unhappy with the difficult loan application process. Meanwhile, only 26 percent of applicants that used online lenders were dissatisfied by the application process and only 17 percent experienced a lengthy wait for a credit decision. These insights can help ensure your new LOS addresses these issues and supports a more positive customer experience.
If you offer consumer, small business or commercial lending, make sure your LOS has a common loan origination design. Common loan origination involves using one system to help a financial institution define a standard set of processes for originating any type of loan request. This standardization drives efficiencies in the underwriting processes to ensure policies are being adhered to across business lines, whether retail, commercial or small business loans. Most importantly, it maximizes the use of the customer data across all of the loan types. This results in reoccurrences of customer inquiries for data and streamlines the fulfillment of the loan application. It also provides insights across the entire relationship, so you are better able to make accurate risk decisions.
Furthermore, discuss your business strategy for both new and existing clients. Each requires a different view of your data, and you’ll want an LOS that can handle extracting required data. Take some time to consider your borrowers and make sure your LOS addresses their needs as well as your own.
Consumer Lending Needs
Borrowers today demand a transparent lending process and the ability to move quickly and easily each step of the way. Your system must support that need. Within your institution, you need a loan origination system that can leverage analytics and scoring so you can respond to customers quickly and with the minimal investment of time and resources. Also, your system has to be able to engage on the consumers’ terms when it comes to taking a loan request. A mobile or internet based solution allows for 24-7 access and provides an answer for the “couch to bank” channel. Remember: the speed of decision making in the consumer lending arena is key—success comes to institutions that capture and decision loans with the least amount of time and customer friction.
Small Business Lending Needs
Centralized lending workflow support is critical for any small business portfolio. Most successful financial institutions have a centralized process and LOS support for that process should be a top requirement. Make sure the workflow is flexible enough to leverage opportunities but also strict enough so your lenders cannot push things through without proper risk management.
A strong LOS should provide the data needed, such as personal and business financial history for a small business loan applicant in order to minimize portfolio risk and be highly responsive to the customer’s needs. An LOS that leverages a centralized database can import data from the core as well as from external systems, which make it a reliable resource for grouping customers into relationships for more effective risk management.
Additionally, your LOS should support multiple decision strategies based on your financial institution’s credit policies. Also, if your institution
currently uses a manual review and underwriting process but is looking to move toward an autodecision strategy, a good LOS can help facilitate that through comprehensive pricing capabilities, data analysis and portfolio reporting. Also even if you do not move toward full auto-decisioning, the consistency of the LOS workflows will help drive even more consistencies and efficiencies in the lending process, giving employees more time to focus on revenue-generating activities like business development efforts. To do this, they must have complete confidence in the accuracy of the data captured from start to finish.
Commercial Lending Needs
Like with a small business loan, speed, process efficiency and data accuracy are extremely important in commercial lending. The credit memo is a key outcome for this line of loans, and your LOS must be able to produce a robust credit memo, pulling out accurate, pertinent data to the credit, rather than just standard reports. If your LOS can be customized to pull information from different systems, it can create a more complete and useful credit memo. Your LOS credit memo capabilities should be configurable and provide your financial institution with a complete view of risk while maximizing opportunities within the loan portfolio. This encourages a more proactive approach to relationship management and supports strategic sales planning across lines of business, enabling your institution to maintain and nurture relationships with valuable commercial clients.
Ideally, your LOS will also help your financial institution manage the entire commercial lending process and all its needs, including relationship management, deal structure, pricing and profitability, and credit analysis, all in one place. Such a system will ensure your institution can efficiently analyze deal opportunities, effectively price them, decision them, and ultimately, optimize portfolio performance.
For all lending types, your loan origination system should be able to take the borrower from the beginning of the process through the workflow and finally to documents. Thorough, automated documentation is important to comply with regulations for all loans.
You can’t have a successful loan operation without keeping your customers happy. Start with a list of needs relative to your borrowers, and you’ll be on track to selecting the right LOS.